Future of Aspen’s airlines up in the air
ASPEN, Colorado ” All three airlines that fly into Aspen are facing dire financial troubles, and it’s anyone’s guess if the local aviation market will crash and burn.
But even with Frontier Airlines’ recent Chapter 11 bankruptcy filing, Delta’s first-quarter loss of $247 million and United Airlines’ $537-million first-quarter loss, industry observers are optimistic that Aspen will remain a strong destination for the airline carriers.
And as long as fuel costs continue to rise and a national recession lingers, the aviation industry will remain in turbulence.
“It’s airline carnage. … All three of these airlines are in trouble, and we are in for a period of turmoil,” said Bill Tomcich, president and CEO of Stay Aspen Snowmass and the local liaison to the airline industry. “But Aspen is in one of the most enviable positions.”
The driving force is that there is more competition in the Aspen market than there has been for more than a decade. With Frontier’s inaugural flight scheduled for Saturday morning and then offering up to five daily flights to Denver, travelers have options that should keep fares competitive.
But airline tickets in and out of Aspen are still more expensive than most places in the country, which is a blessing in disguise, according to Mike Boyd, an aviation consultant in Evergreen, Colo.
United Airlines parent UAL Corp. said Tuesday that it’s cutting flights and 1,100 jobs to combat soaring fuel costs and recoup its losses. But it’s unlikely that flights will be cut in and out of Aspen.
Business here appears to be extremely lucrative for the short-haul carriers who likely will depend on this market as a steady revenue stream.
“It won’t be Aspen … your fares are too high,” Boyd said, adding that prices can’t get much higher here. “Markets like Aspen can only help the situation. You’re kind of bulletproof from this.
“Believe me, you’re in the minority.”
United’s hub at Denver International Airport could see fewer flights, which could affect the short leg to Aspen if there aren’t as many aircraft flying in and out of DIA, Tomcich said.
“Reduced frequencies could affect us,” he said. “United is probably the most vulnerable.”
Robin Urbanski, a spokeswoman for United Airlines, said it will be several weeks before the airline makes service reductions.
“We haven’t made those decisions yet as to where we will reduce service to and where we will lay off employees,” she said. “Our main priority … is reducing the frequencies rather than stop flying to a particular destination.”
Skywest Airlines Inc. flies as United Express on behalf of United Airlines. The carrier has reduced service to Aspen for the offseason, with seven daily flights offered between Sardy Field and DIA during the week and six on Saturday. Beginning June 5, that number rises to 13 flights a day, with a direct flight to Los Angeles.
UAL’s first quarter loss, in what it called an “extraordinarily difficult” environment for airlines, was the biggest since the nation’s second-largest carrier emerged from bankruptcy in 2006.
Chicago-based UAL said its nearly 8 percent growth in revenue from the first quarter of 2007 was more than offset by a $618 million jump in fuel costs, which rose nearly 50 percent in a year.
UAL said it will lower its planned 2008 spending by $400 million and eliminate 500 salaried and management jobs and 600 union jobs by the end of the year. UAL also said it will cut capacity 9 percent by the fourth quarter, on top of a 5 percent reduction in the fourth quarter of 2007, and take 10 to 15 more narrow-body aircraft out of its operating fleet for a total of 30 to be grounded.
Delta’s announcement earlier this month that it reached an agreement to merge with Northwest Airlines could have a favorable effect on the Aspen market. Delta currently only flies to two cities from Aspen ” Salt Lake City and Atlanta. A merger with Northwest creates more destinations, possibly in the Midwest.
“That could create some interesting route structures,” Tomcich said. “There could be future opportunities to connect the dots.”
Delta currently operates one flight from Salt Lake City to Aspen. Beginning June 5, that number will increase to two flights a day. During the winter, the airline offers a direct flight from its Atlanta hub to Aspen.
The transaction between Delta and Northwest will create America’s premier global airline, which is expected to generate in excess of $1 billion in annual revenue and cost synergies.
Delta reported Wednesday that its net loss for the first quarter, excluding special items, was $274 million, or $0.69 per diluted share, driven by a $585 million year-over-year increase in the cost of fuel.
Northwest reported a first quarter 2008 net loss of $292 million this week. Northwest paid $2.77 per gallon for jet fuel in the first quarter compared to $1.85 a gallon in the first quarter of 2007 ” an increase of 49.7 percent.
Frontier’s turbulent landing
Frontier Airlines, which filed for Chapter 11 bankruptcy April 10, announced Wednesday it has canceled service to Missoula, Mont., which was one of eight new cities that the company planned to serve beginning this spring.
But Aspen remains on Frontier’s destination map as a new market, despite the carrier’s dismal economic condition.
Joe Hodas, a spokesman for Frontier, said the airline is proceeding with plans to begin service to Aspen on its subsidiary, Lynx Aviation, on April 26.
Lynx announced its expansion plans in February. In addition to Aspen, the new cities Lynx will fly into include Colorado Springs, Grand Junction and Durango, as well as Jackson, Wyo., Fargo, N.D., and Bozeman, Mont.
Frontier canceled service to Sioux City, Iowa; Jacksonville, Fla.; Little Rock, Ark.; Memphis, Tenn., and Tulsa, Okla.
Airline executives say their business plan will fly in the smaller markets because of its new fleet of 10 Bombardier Q400 turboprop aircraft. The Q400, dubbed the “green machine,” is about 35 percent more fuel efficient than a similarly sized regional jet.
On the bright side, Tomcich said there were only four aircraft that could serve the Aspen market a few years ago. Today, there are more than 70, with Frontier’s fleet of 10 Q400s and United’s CRJ-700, a 70-seat regional jet airliner.
“The fact that we have these aircraft in our market, we are in a way less vulnerable position than we were three years ago,” he said, adding it’s going to incumbent upon travelers to continue booking flights in order to keep the airlines afloat. “In order to sustain these levels of service, we’ve got to support the airlines.”
Nevertheless, it’s going to be a bumpy ride while the airlines get their affairs in order.
“It’s staggering,” Tomcich said. “There is a lot going on, more than I’ve ever seen. “Hang onto your seats, it’s going to be a wild ride.”
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